The Financial Intelligence Centre (FIC) recently published Public Compliance Communication (PCC) 59 which offers accountable institutions guidance on compliance with the beneficial ownership requirements of the FIC Act.
Accountable institutions are required to establish the ownership and control structure of clients that are legal persons, trusts, or partnerships. Identifying and verifying the natural persons who are beneficial owners provides accountable institutions with the required understanding as to who ultimately receives the benefits from a client, thereby mitigating the risks associated with money laundering, terrorist financing and proliferation financing.
The PCC advises that accountable institutions must obtain information on the different types of ownership interests and verify the information against reliable independent third-party sources.
Furthermore, the PCC confirms the new threshold and the FIC’s view that holding 5% or more of ownership interest in a legal person is usually sufficient to exercise a controlling ownership interest in the legal person. The 5% threshold sets the best practice standard for beneficial ownership identification.
The FIC advised that accountable institutions may also according to their risk-based approach opt to identify and verify persons who hold less than the recommended 5% beneficial ownership interest.
However, when dealing with partnerships, accountable institutions must identify and verify each partner within the partnership, regardless of their percentage of ownership.
Ultimately, accountable institutions must be satisfied that it knows “who” the beneficial owner is, and “why” or “how” the person is a beneficial owner.
The PCC cautions that sole reliance on self-declared beneficial ownership information provided by clients without verifying that information against a third-party source is not adequate and should be avoided. Instead, accountable institutions are advised to rely on multiple sources to gather credible beneficial ownership information.
Additionally, accountable institutions are reminded that they must scrutinise client information, including the client’s beneficial ownership information to determine whether the client and/or the beneficial owners are listed on the Targeted Financial Sanctions list.
In instances where an accountable institution is unable to identify and take reasonable steps to verify a beneficial owner, that accountable institution must not establish a business relationship or conduct a single transaction. The accountable institution must terminate any existing business relationship with the client in accordance with its RMCP, and consider filing a suspicious and unusual transaction report to the FIC.